[my regular financial market analysis will resume next week]
A ‘capitalist crisis’ had been speciously described as the main cause of the recent global financial crisis centered on the US.
This ‘failure of capitalism’ had been utilized by the progressive persuasion to justify on more regulation and call for an increase in the socialization of many aspects of the economy.
Yet, in spite of the vitriolic rhetoric against a chimerical unadulterated ‘free markets’ [mostly corporatism not free markets], large scale protectionism which used to be an intuitive policy response had not generally occurred.
As we pointed out in Could Asians Be Assimilating On Western Free Market Ideals? , temporary tariffs in 2008, at the crest of the crisis, had been less than the annual average from 2000-2008-where India and the US accounted for most of the protectionist actions.
On the contrary, some emerging markets, as China, have embarked on the direction of freer markets through regional integration [see Asian Regional Integration Deepens With The Advent Of China ASEAN Free Trade Zone]
Now that the financial crisis seem to have somewhat ebbed with least adverse reactionary policies from most of the world, the table seems to have turned.
This time socialism or its extreme form-communism-as signified by the unfolding events in North Korea, has reportedly been buffeted by a political upheaval; ironically from the emergence of capitalism.
This from the Washington Post, (bold emphasis added) (Hat tip: Mark Perry)
``North Korean leader Kim Jong Il moved early this month to wipe out much of the wealth earned in the past decade in his country's private markets. As part of a surprise currency revaluation, the government sharply restricted the amount of old bills that could be traded for new and made it illegal for citizens to have more than $40 worth of local currency.
``It was an unexplained decision -- the kind of command that for more than six decades has been obeyed without question in North Korea. But this time, in a highly unusual challenge to Kim's near-absolute authority, the markets and the people who depend on them pushed back.
``Grass-roots anger and a reported riot in an eastern coastal city pressured the government to amend its confiscatory policy. Exchange limits have been eased, allowing individuals to possess more cash.
``The currency episode reveals new constraints on Kim's power and may signal a fundamental change in the operation of what is often called the world's most repressive state. The change is driven by private markets that now feed and employ half the country's 23.5 million people, and appear to have grown too big and too important to be crushed, even by a leader who loathes them."
In short, markets have begun to reassert themselves by placing increased pressures on the political dimension of the Kims of North Korea.
In addition, some clues from the same report tell us of the striking difference between what used to work and what hasn't today.
Again from the Washington Post, (bold emphasis added)
``But capitalism seems to have already taken root. U.N. officials estimate that half the calories consumed in North Korea come from food bought in private markets, and that nearly 80 percent of household income derives from buying and selling in the markets, according to a study last year in the Seoul Journal of Economics.
``Private markets are flooding the country with electronics from China and elsewhere.
``Cheap radios, televisions, MP3 devices, DVD players, video cameras and cellphones are seeping into a semi-feudal society, where a trusted elite lives in the capital Pyongyang. Surrounding the elite is a suspect peasantry that is poor, stunted by hunger and spied upon by layers of state security.
``In the past year, the elites in Pyongyang have been granted authorized access to mobile phones -- the number is soon expected to reach 120,000. In the border regions with China, unauthorized mobile phone use has also increased among the trading classes. And unlike most of the mobile phones in Pyongyang, the illegal phones are set up to make international calls.
``Chinese telecom companies have built relay towers near the border, providing strong mobile signals in many nearby North Korean towns, according to the Chosun Ilbo, a Seoul-based daily.
``Those phones have become a new source of real-time reporting to the outside world on events inside North Korea, as networks of informants call in news to Web sites such as the Seoul-based Daily NK and the Buddhist aid group Good Friends."
Get it?
China, who used to be a staunch and a key ally to the success of the Kim's communist regime, appears to be influencing a political shift.
By allowing telecom "relay towers near the border" seems quite a revelation. Prying open North Korea's highly restricted market to trade with China and emancipating North Korean consumers should blend well with China's newfangled strategy to integrate the region.
Lastly, more liberal "blackmarket" communications appears to be providing support for the blossoming free market, as well as a backbone for the political foundation which underpins such dynamic in one of the last remnants of communism.
Since free trade in North Korea appears to have assimilated political legs, it looks like a question of when (and not if) will the transition to a market economy will take hold (this would seem like a 1-3 year event).
From which we ask, Will North Korea's version of the 'Berlin Wall' Fall or the Korean Demilitarized Zone fall in 2010?
A ‘capitalist crisis’ had been speciously described as the main cause of the recent global financial crisis centered on the US.
This ‘failure of capitalism’ had been utilized by the progressive persuasion to justify on more regulation and call for an increase in the socialization of many aspects of the economy.
Yet, in spite of the vitriolic rhetoric against a chimerical unadulterated ‘free markets’ [mostly corporatism not free markets], large scale protectionism which used to be an intuitive policy response had not generally occurred.
As we pointed out in Could Asians Be Assimilating On Western Free Market Ideals? , temporary tariffs in 2008, at the crest of the crisis, had been less than the annual average from 2000-2008-where India and the US accounted for most of the protectionist actions.
On the contrary, some emerging markets, as China, have embarked on the direction of freer markets through regional integration [see Asian Regional Integration Deepens With The Advent Of China ASEAN Free Trade Zone]
Now that the financial crisis seem to have somewhat ebbed with least adverse reactionary policies from most of the world, the table seems to have turned.
This time socialism or its extreme form-communism-as signified by the unfolding events in North Korea, has reportedly been buffeted by a political upheaval; ironically from the emergence of capitalism.
This from the Washington Post, (bold emphasis added) (Hat tip: Mark Perry)
``North Korean leader Kim Jong Il moved early this month to wipe out much of the wealth earned in the past decade in his country's private markets. As part of a surprise currency revaluation, the government sharply restricted the amount of old bills that could be traded for new and made it illegal for citizens to have more than $40 worth of local currency.
``It was an unexplained decision -- the kind of command that for more than six decades has been obeyed without question in North Korea. But this time, in a highly unusual challenge to Kim's near-absolute authority, the markets and the people who depend on them pushed back.
``Grass-roots anger and a reported riot in an eastern coastal city pressured the government to amend its confiscatory policy. Exchange limits have been eased, allowing individuals to possess more cash.
``The currency episode reveals new constraints on Kim's power and may signal a fundamental change in the operation of what is often called the world's most repressive state. The change is driven by private markets that now feed and employ half the country's 23.5 million people, and appear to have grown too big and too important to be crushed, even by a leader who loathes them."
In short, markets have begun to reassert themselves by placing increased pressures on the political dimension of the Kims of North Korea.
In addition, some clues from the same report tell us of the striking difference between what used to work and what hasn't today.
Again from the Washington Post, (bold emphasis added)
``But capitalism seems to have already taken root. U.N. officials estimate that half the calories consumed in North Korea come from food bought in private markets, and that nearly 80 percent of household income derives from buying and selling in the markets, according to a study last year in the Seoul Journal of Economics.
``Private markets are flooding the country with electronics from China and elsewhere.
``Cheap radios, televisions, MP3 devices, DVD players, video cameras and cellphones are seeping into a semi-feudal society, where a trusted elite lives in the capital Pyongyang. Surrounding the elite is a suspect peasantry that is poor, stunted by hunger and spied upon by layers of state security.
``In the past year, the elites in Pyongyang have been granted authorized access to mobile phones -- the number is soon expected to reach 120,000. In the border regions with China, unauthorized mobile phone use has also increased among the trading classes. And unlike most of the mobile phones in Pyongyang, the illegal phones are set up to make international calls.
``Chinese telecom companies have built relay towers near the border, providing strong mobile signals in many nearby North Korean towns, according to the Chosun Ilbo, a Seoul-based daily.
``Those phones have become a new source of real-time reporting to the outside world on events inside North Korea, as networks of informants call in news to Web sites such as the Seoul-based Daily NK and the Buddhist aid group Good Friends."
Get it?
China, who used to be a staunch and a key ally to the success of the Kim's communist regime, appears to be influencing a political shift.
By allowing telecom "relay towers near the border" seems quite a revelation. Prying open North Korea's highly restricted market to trade with China and emancipating North Korean consumers should blend well with China's newfangled strategy to integrate the region.
Lastly, more liberal "blackmarket" communications appears to be providing support for the blossoming free market, as well as a backbone for the political foundation which underpins such dynamic in one of the last remnants of communism.
Since free trade in North Korea appears to have assimilated political legs, it looks like a question of when (and not if) will the transition to a market economy will take hold (this would seem like a 1-3 year event).
From which we ask, Will North Korea's version of the 'Berlin Wall' Fall or the Korean Demilitarized Zone fall in 2010?
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